best practices in budgeting and fiscal policy november 17, 2015 john fishbein, senior program...

Best Practices in Budgeting and Fiscal Policy

November 17, 2015

John Fishbein, Senior Program Manager, Technical Services Center, GFOA

[email protected]

312-578-2268

mailto:[email protected]

GOVERNMENT FINANCE OFFICERS ASSOCIATION

http://www.gfoa.org/best-practices?field_committee_value=Governmental_Budgeting_and_Fiscal+Policy&sort_order=DESC

38 best practices from the Budget Committee


Major Categories

• Fiscal Policy

• Linking the Budget to Organization Goals and Performance

• The Budget Process and Techniques

• Elements of the Operating Budget Document


Fiscal Policy

• Adopting Financial Policies• Determining the Appropriate Level of Unrestricted Fund Balance in the

General Fund• Replenishing General Fund Balance • Determining the Appropriate Levels of Working Capital in Enterprise

Funds • Establishing Government Charges and Fees• Establishing an Effective Grants Policy• Creating a Comprehensive Risk Management Program• Achieving a Structurally Balanced Budget • Business Preparedness and Continuity Guidelines• The Public Finance Officer’s Role in Fiscal Sustainability• The Public Finance Officer’s Role in Collective Bargaining• Key Issues in Succession Planning • Ensuring Other Post Employment Benefits (OPEB) Sustainability• Considerations for Prefunding OPEB Obligations


Adopting Financial Policies (2001)

• Useful as framework for addressing policy issues• Recommendation

• Staff develop• Governing board formally adopts• Summarized in budget document• Reviewed for continued relevance/gaps


Adopting Financial Policies (cont.) Three basic types of policies

Financial planning• Balanced budget• Long-range planning• Asset inventory

Revenue policies• Revenue diversification• Fees and charges• One-time and unpredictable revenues

Expenditure policies• Debt policy• Reserve or stabilization funds• Accountability (monitoring)


Essential Policies Highly Advisable Policies

Fund Balance and Reserves Accounting & Financial Reporting

Operating Budget Revenues

Capital Budgeting and Planning Internal Controls

Debt Management Expenditures

Long-Range Financial Planning Purchasing

Investment Risk Management

Economic Development

Relative Importance of Financial Policy Types


City of Sterling Heights, MI.


Determining the Appropriate Level of Fund Balance in the General Fund (2002, 2009)

Focus on unrestricted fund balance Committed fund balance Assigned fund balance Unassigned fund balance

Minimum level of unrestricted fund balance Two months of regular revenues or regular

expenditures Environmental factors to be considered

Predictability of revenues Volatility of expenditures Availability of other resources Commitments


City of Wheat Ridge, CO.


Replenishing General Fund Balance (2011)

Policy considerations Define the time period within which and contingencies for

which fund balances will be used. Describe how the government’s expenditure levels will

be adjusted to match any new economic realities. Describe the time period over which the components of

fund balance will be replenished and the means by which they will be replenished.


Replenishing General Fund Balance (cont.)

Factors influencing the replenishment time horizon The budgetary reasons behind the fund balance

targets. Recovering from an extreme event. Political continuity. Financial planning time horizons. Long-term forecasts and economic conditions. Milestones for gradual replenishment. External financing expectations.


VII. MINIMUM FUND BALANCE RESERVES The City will budget target minimum cash fund balances for various operating funds to provide reserves for unforeseen emergencies or revenue shortfalls and to eliminate the need for short-term borrowing for cash flow needs.

City of Sidney, OH.

It is the policy of the City of Sidney to meet or exceed these targets in each budget and Five Year Financial Plan. The following target cash fund balance for the General Fund is 20% of annual expenditures.

We recognize that unforeseen events may cause short-term breaches of these fund balance reserves. However, if such a breach occurs, or is expected to occur within the five-year planning cycle, the budget balancing strategies will be invoked to determine corrective actions. When necessary, the following budget-balancing strategies will be used in order of priority.1)reduce expenditures through improved productivity; 2)shift expense to other parties; 3)create new service fees or increase existing fees; 4)seek tax rate increases; 5)reduce or eliminate services.


Determining the Appropriate Levels of Working Capital in Enterprise Funds (2011)

Governments should use working capital as the measure of available margin or buffer in enterprise funds. Working capital is defined as current assets minus current liabilities. An appropriate allowance for uncollectibles should be

established. The amount of inventories and prepaids included in current

assets should be a realistic estimate of the amount that will be consumed in one year.

Target for working capital should be no be less than forty-five (45) days worth of annual operating expenses.


Determining the Appropriate Levels of Working Capital in Enterprise Funds (cont.)

Considerations or factors in setting a working capital target Support from general government. Transfers out. Cash cycles. Customer concentration. Demand for services. Control over rates and revenues. Asset age and condition. Volatility of expenses. Control over expenses. Management plans for working capital. Separate targets for operating and capital needs. Debt position.


The minimum Unrestricted Net Assets for the Enterprise Funds is established at three months of operating expenditures plus one quarter (25%) of the accumulated depreciation of the Capital Assets of the Fund. Enterprise fund revenues are traditionally stable and predictable; establishing a minimum fund balance of three months operating expenditures should provide sufficient security for operating activities in these Funds. The addition of one quarter (25%) of accumulated depreciation of the Capital Assets of the enterprise funds is necessary to ensure adequate resources are available to reconstruct or rehabilitate capital assets as they reach the end of their useful lives. The expense of reconstructing or rehabilitating capital assets in enterprise funds can be prohibitive unless an adequate reserve has been accumulated in the fund for the purpose of reconstruction or rehabilitation.

Village of Barrington,

IL.


Establishing Government Charges and Fees (1996)

Adopt formal policy (public) Factors to be taken into account in pricing Intent to recover full cost? Circumstances where more or less than 100% recovery

permitted Rationale for not recovering full cost

Full cost should be calculated to provide a basis for setting fees or charges

Review and update regularly


Water One, KS.


Pinellas County, FL.


Establishing an Effective Grants Policy (2013)

• Grants are an attractive form of funding for governments and frequently come with special requirements that the recipient must follow. An effective grants policy provides guidance to staff as it relates to associated processes and procedures in order to maximize the benefits and minimize the risks.

• Governments need to develop a formal grants policy that address steps to take prior to applying for or accepting grants, and that the policy at minimum contain the following components: • Grants identification and application. • Strategic alignment. • Funding analysis. • Evaluation prior to renewal or grant continuation. • Administrative and operational support.


Charles County, MD.County Grant Policy

It is the purpose of this policy to support creativity and innovation in identifying and addressing problems that cannot be resolved with existing resources, but might be suitable areas for seeking grant funds. It is important to emphasize the need for adequate planning and quality control in all activities related to the administration of grants that involve resources and personnel of Charles County Government (County)Projects funded in whole or in part with grant money are not independent of County operations and should not be created simply in reaction to a notice of availability of funds, whatever the source. It is the practice of the County to be proactive in its pursuit of supplemental funding sources. County personnel should identify problems that cannot be solved with current resources, engage in broad-based planning to address those problems, and carefully consider whether grants are an appropriate resource to pursue, given their temporary nature.For the purpose of the policy, a grant is an award of financial assistance for which the County, or a department thereof, has made application to a public or private entity and is subject to requirements imposed by the awarding agency. These requirements include, but may not be limited to, implementing an agreed upon program, being accountable for the use of those funds awarded to the County to accomplish said program, and providing cash or in-kind matching funds or other contribution of County resources.


Creating a Comprehensive Risk Management Program (2009)

Identify potential events that may affect the government adversely Protect and minimize risks to the government’s property, services

and employees Grown in importance due to:

Legal, political, medical liabilities Increased use of technology Higher litigation costs

Following steps should be included in an effective risk management program: Risk identification Risk evaluation Risk treatment Risk management implementation Risk program review


Creating a Comprehensive Risk Management (cont.) Risk identification

Physical environment (natural or man-made disasters and infrastructure) Legal environment (laws and legal precedents) Operational environment (day-to-day activities and actions within the local

government, including services provided and workforce demographics) Political environment (legislative activity, elections) Social environment (socio-economic composition of the community) Economic environment (market trends, interest rates) Internal environment (the attitude of individuals towards risk)

Risk evaluation Frequency and severity

Risk treatment Loss prevention and control (training, workshops, etc) Risk transfer (financial, contractual, etc) Risk retention (self insures) Risk avoidance

Risk management implementation Risk management review


City of Bloomington,

MN.


Structurally Balanced Budget Policy (2013)• Most state and local governments are subject to a requirement to pass

a balanced budget. However, a budget that may fit the statutory definition of a “balanced budget” may not, in fact, be financially sustainable. A government needs to make sure that it is aware of the distinction between satisfying the statutory definition and achieving a true structurally balanced budget.

• The policy should include parameters for achieving and maintaining structural balance where recurring revenues are equal to recurring expenditures in the adopted budget.

• The government should identify key items related to structural balance. These include: recurring and non-recurring revenues, recurring and non-recurring expenditures, and reserves.

• With the forgoing terms defined, a government should adopt a formal policy calling for structural balance of the budget. The policy should call for the budget to be structurally balanced, where recurring revenues equal or exceed recurring expenditures. The policy should also call for the budget presentation to identify how recurring revenues are aligned with or not aligned with recurring expenditures.


City of Abilene, Texas

Maricopa County, AZ.


Maricopa County, AZ.


Business Preparedness and Continuity Guidelines (2005)

Develop, test, and maintain a plan to continue basic business operations

Assess own unique risks Strategy to mitigate risks and control costs

External planning resources• Disaster and emergency recovery plan assessment• Disaster and emergency recovery plan testing• FEMA guidelines

Other planning considerations• Emergency response plan compliance (OSHA, EPA)• Risk management (insurance coverage)• Administrative support functions (contact information for

all members of the finance team)• Outsourced/recovery services (ability to overcome

disruption themselves)


New York State Teacher’s Retirement System, NY.


The Public Finance Officers Role in Fiscal Sustainability (2002, 2012)

Balance needed (“triple bottom line”) Economy Environment Social Equity

Categories of specific representations Define sustainability Reporting Analyze return on investment Integrate sustainability goals into planning and budgeting


City of Elmhurst, IL.


The Public Finance Officers Role in Collective Bargaining (2015)

Finance officer’s expertise should be utilized. Develop timelines. Prioritize issues. Communicate financial pressures. Evaluate renegotiation triggers. Make peer comparisons. Determine proposal costs and affordability. Determine the effects on different employee units. Evaluate retroactive proposals. Consider one-time payments or non-financial incentives.


Commonwealth of MassachusettsThis memorandum implements the provisions of the new agreement

effective July 1, 2014. Information and implementation instructions from the Human Resources Division (HRD), the Office of the Comptroller (CTR) and the Administration and Finance (ANF) are provided herein. The following changes apply to employees in bargaining units 1, 3 and 6.

• UNION BUSINESS• ANTI-DISCRIMINATION/AFFIRMATIVE ACTION• MUTUAL RESPECT• WORK WEEK AND WORK SCHEDULE• LEAVE• VACATIONS• HOLIDAYS• EMPLOYEE EXPENSES• SALARY RATES• PROMOTIONS• LAY-OFF/RECALL PROCESS• REASSIGNMENTS• ARBITRATION OF DISCIPLINARY ACTION• GRIEVANCE PROCEDURE• CLASSIFICATION AND RE-CLASSIFICATION


Key Issues in Succession Planning (2011)• Develop an integrated approach to succession management. • Continually assess potential employee turnover. • Provide a formal, written succession plan as a framework for

succession initiatives. • Develop written policies and procedures to facilitate knowledge

transfer. • Development of leadership skills should be a key component of any

succession planning initiative. • Encouragement of personal professional development activities

should be a key part of the succession planning effort.• Design of better recruitment and retention practices may aid in the

succession process.• Consideration must be given to collective bargaining agreements

and how those agreements fit in with the overall succession plan. • Consider non-traditional hiring strategies.


The organization will be faced with numerous retirements in key positions in the coming years. Proper succession planning requires us to begin now to prepare our staff to assume leadership positions in the future. The budget includes partial funding for a certified public managers program, which will be one step in a comprehensive staff development effort.

City of Abilene, TX.


Ensuring Other Postemployment Benefits (OPEB) Sustainability (2007, 2012)

Background» Employee compensation packages for active workers often

include healthcare and similar benefits following the completion of active service.

» Such benefits are described as other postemployment benefits (OPEB) to distinguish them from pensions.

» For many years, employers have been required to recognize expenses for the cost of pension benefits as those benefits are earned by employees during their active service life. The Governmental Accounting Standards Board (GASB) has extended this same requirement to OPEB.

» The real issue is meeting the budgetary and funding challenge that those accounting standards highlight.


Ensuring Other Postemployment Benefits (OPEB) Sustainability (continued)

Recommendation

» Governments should develop a deliberative process to ensure the sustainability (i.e., benefits are, and reasonably may be expected to remain, affordable to the government, competitive and sufficient to meet employee needs) of any OPEB they offer to their employees.

» Develop principles and priorities to guide decision-making for OPEB that considers benefit design, funding approaches, and the needs of all stakeholders.

» Evaluate and design benefits to ensure they are sustainable.


Ensuring Other Postemployment Benefits (OPEB) Sustainability (continued)

» Implementing healthcare cost containment measures.

» Improve coordination with Medicare benefits.

» Establishing vesting rules that provide levels of benefits that are commensurate with years of service.

» Establish eligibility rules that avoid including retirees, dependents, and spouses who are otherwise insured.

» Create a tiered system of benefits based on hiring dates

» Replace defined benefits with defined contribution or a mixture of the two.


Considerations for Prefunding OPEB Obligations (2008)

Background

» An actuarial accrued liability for OPEB can result from an employer’s obligation to provide explicit benefit payments (e.g., the employer will pay a percentage of retiree healthcare premiums or the employer will pay a fixed dollar amount toward retiree healthcare premiums) or from an implicit rate subsidy (i.e., retirees are allowed to pay the same rates as active employees, even though their age-adjusted premium would have been higher). For financial reporting purposes, both situations are treated identically. That is, the cost of the benefit is actuarially allocated to each period in the form of an annual required contribution (ARC). An employer’s failure to fully fund the ARC results in an accounting liability (i.e., net OPEB obligation) in financial statements prepared using the accrual basis of accounting.


Recommendation• GFOA recommends that the financing of postemployment

benefits as they are earned (i.e., prefunding v. pay-as-you-go funding) offers significant advantages from the vantage point of equity and sustainability. Just as important, the earnings on the resources thus accumulated will lower the amount that ultimately must be budgeted by the employer.

• GFOA strongly recommends that OPEB involving explicit benefit payments be prefunded on an actuarial basis, as discussed in GFOAs Best Practice, "Ensuring the Sustainability of Other �Postemployment Benefits."

• GFOA believes that the prefunding of OPEB resulting from an implicit rate subsidy also is desirable. Prefunding provides equity among generations of taxpayers, levels annual retiree healthcare costs and helps ensure sustainability of the benefit.


City of Grants Pass, OR.


Establishment of Strategic Plans (2005)

Every government should use some form of strategic planning

Essential steps of a sound process Initiate the process Prepare a mission statement Assess environmental factors Identify critical issues Agree on a small number of broad goals


Establishment of Strategic Plans (cont.) (2005)

Develop strategies to achieve broad goalsCreate an action planDevelop measurable objectivesIncorporate performance measuresReview or adopt the planImplement the planMonitor progressReassess the plan


City of Durham NC.


Long-Term Financial Planning (2008) Time horizon

Five to 10 years into the future Scope

Consider all appropriated funds, but especially those that account for issues of top concern

Don’t just focus on the General Fund Frequency

Update long-term planning activities as needed Content

Financial environment Revenue and expenditure forecasts Debt position and affordability analysis Strategies for achieving financial balance Plan monitoring mechanisms

Visibility Effective means to communicate information


St. Johns County, FL.


(1) Determine how much money is available.

(2) Prioritize results.

(3) Allocate resources among high priority results.

(4) Conduct analysis to determine what strategies, programs, and activities will best achieve desired results.

(5) Budget available dollars to the most significant programs and activities.

(6) Set measures of annual progress, monitor, and close the feedback loop.

(7) Check what actually happened.

(8) Communicate performance results.

Budgeting for Results and Outcomes (2007)


City of Redmond, WA.


A Systematic Approach to Managing Performance (2011)

The National Performance Management Commission, representing eleven national public interest organizations of elected and appointed state and local government officials (including the GFOA), issued a report in 2010, A Performance Management Framework for State and Local Government: From Measurement and Reporting to Management and Improving. Information, measures, goals, priorities, and activities are relevant to the

priorities and wellbeing of the government and the community. Information related to performance, decisions, regulations, and

processes is transparent —easy to access, use, and understand. Goals, programs, activities, and resources are aligned with priorities and

desired results. Decisions and processes are driven by timely, accurate, and meaningful

data. Practices are sustainable over time and across organizational changes. Performance management helps to transform the organization, its

management, and the policymaking process.


City of Greenville,

SC.


Performance Management for Decision Making (2002, 2007)

• Important component of long-term strategic planning and decision making

• Linked to the budget• Based on program goals and objectives tied to program mission

or purpose• Focus on outcomes• Comparisons over time• Verifiable, understandable, and timely• Consistent throughout the strategic plan, budget, accounting and

reporting systems and to the extent practical, be consistent over time

• Reported internally and externally• Monitored and used in managerial decision-making processes


City of Corvallis,

OR.


Alternative Service Delivery: Shared Services (2007)

• Getting Started

• Feasibility Study

• Coming to Agreement

• Implementation

• Ongoing Monitoring

• Long-term Review/Agreement Reassessment


Examining the Benefits of Managed Competition (2006)

• Executive direction

• Environmental consideration

• Stakeholder support

• Legal ramifications

• Service availability

• Cost

• Transition process

• Performance metrics


Village of Carol

Stream, IL.


Public Participation in Planning, Budgeting, and Performance Management (2009)

• Good public participation practices can help governments be more accountable and responsive.

• Traditionally, public participation meant voting, running for office, attending public hearings, and keeping informed on important issues of the day by the local newspaper.

• More recently, governments have used new forms of public involvement – surveys, focus groups, neighborhood councils, and Citizen Relationship Management systems, as inputs to decisions about service levels and preferences, community priorities, and organizational performance.

• Identifying the Public’s Perspective - The best way to assure a broad perspective is to collect information in a variety of ways and from a variety of sources.

• Identifying citizen preferences and satisfaction levels should occur before a decision has been made.

• Public involvement approaches should encourage all citizens to participate.

• Governments should explain how public involvement has made a difference in plans, budgets, and performance, and gather public feedback on how successful the process has been through the public’s eyes.


City of Corvallis, OR.


Best Practices in School District Budgeting (2015)

GFOA has developed a series of Best Practices in School District Budgeting, which clearly outline steps to developing a budget that best aligns resources with student achievement goals. The budgeting process presented in these Best Practices is focused on optimizing student achievement within available resources. It encompasses a complete cycle for long-term financial planning and budgeting, including planning and preparing to undertake the budget process, developing a budget, evaluating how the budget process worked, and adjusting accordingly. Within this cycle, the district’s instructional priorities provide a guide for decision-making. GFOA recommends that all districts go through the following steps as part of their planning and budgeting process.Step 1. Plan and Prepare. Step 2. Set Instructional Priorities. Step 3. Pay for Priorities.Step 4. Implement Plan. Step 5. Ensure Sustainability.


Best Practices in Community College Budgeting (2015) GFOA has developed a series of Best Practices in Community College Budgeting, which clearly outline steps to developing a budget that best aligns resources with student achievement goals. The budgeting process advocated for by the Best Practices in Community College Budgeting is focused on optimizing student achievement within available resources. It encompasses a complete cycle for long-term financial planning and budgeting, including planning the budget process, developing a budget, evaluating how the budget process worked and adjusting accordingly. Throughout this cycle, the community college’s institutional goals serve as the overarching guide for decision-making and resource allocation. GFOA recommends that all community colleges go through the following steps as part of their planning and budgeting process.Step 1. Prepare and Develop Inputs to the Budget Process. Step 2. Define Goals and Identify Gaps. Step 3. Develop Strategies to Close the Gaps. Step 4. Prioritize Spending to Enact the Strategies and Allocate Resources. Step 5. Check Performance. Step 6. Other Integrated Budgeting Practices.


• Recommended Budget Practices from the National Advisory Council on State and Local Budgeting

• Financial Forecasting in the Budget Preparation Process• Effective Budgeting of Salary and Wages• Inflationary Indices in Budgeting• Strategies for Managing Health-Care Costs• Measuring the Full Costs of Government Service• Pricing Internal Services• Incorporating a Capital Project Budget in the Budget Process

The Budget Process and Techniques


National Advisory Council on State and Local Budgeting (1998)

NACSLB (1995-1997) GFOA and 7 other SLG associations Goal = set of recommended budget practices

Recommendation: Adopt NACSLB Framework and practice statements Blueprint rather than mandatory prescriptions Incremental implementation foreseen


Applying the Practices

1. Stakeholder Input

2. Long Term Goals

3. Short-termgoals

4. Direction to staff

5. Operating / budget Impacts6. Adopt budget

7. Monitorresults

8. Adjust as necessary


Financial Forecasting in the Budget Preparation Process (2014)

Define Assumptions Time Horizon Objective Political/Legal Issues Major Revenue and Expenditure Categories

Gather Information Preliminary/Exploratory Analysis

Business Cycles Demographic Trends Anomalies Variables


Financial Forecasting in the Budget Preparation Process (cont.) (2014)

Select Methods Extrapolation Regression Knowledge-based

Implement Methods Make the Forecast Forecast Ranges

Use the Forecast Credibility of the Forecaster Presentation Approach Linking Forecast to Decision-making.


Lakeshore Technical College, WI.


Effective Budgeting of Salary and Wages (2010)• Personnel Tracking System

• Vacancy Adjustments

– Start Dates

– Trends

– Frozen Positions

– Funded versus Unfunded

– Attrition

• Collective Bargaining Agreements

• Impact of Inflation

• Optimal Staffing Level

– Comparison to other Governments

– Staffing Guidelines

– Classifying Position by Goal

– Use of Volunteers/Temporary Positions


• Compensation Approaches

– Step and Grade Systems

– Pay for Performance

– Surveys

• Personnel Categorization

– Capital versus Operating

– Cost Allocation

– Funding Sources

– Privatization or Shared Services

• Monitoring

Effective Budgeting of Salary and Wages (cont.) (2010)


City of White Plains, N.Y.


Inflationary Indices in Budgeting (2010)• Inflation Indices

• CPI

• GDP Deflator

• Construction Price Index

• Employment Cost Index

• Municipal Cost Index

• Alternatives to Using Indices

• Economic Consultants

• Local Universities

• Peer Governments

• Vendor Contacts

• Industry Specific Journals


Village of Westmont, Illinois


Strategies for Managing Health-Care Costs (2014)

Monitor Medical Plan Network and Prescription Drug Discounts Set an Appropriate Level of Cost Sharing with Employees Encouraging Good Consumer Behaviors Analyze Risks in Self-Insurance

Premiums Administrative Fees High-cost Claims High-cost Areas Stop-loss Insurance Programs Wellness Programs


Strategies for Managing Health-Care Costs (cont.) (2014) Measurements to Assess Plan Performance

Medical Loss Ratio Medical Claim Trends Network Discounts Administrative Fees Prescription Drug Cost Trend/Generic Drug Substitution Rate

Additional Strategies Federal Requirements Long-term Plan Build Support Educate Employees Audit Plan Records Rebid Periodically


City of Grants Pass, OR.


Measuring the Full Costs of Government Service (2002)

Calculate the full cost of all services Useful when considering alternative service-delivery

options• Distinguish avoidable costs from unavoidable costs• Consider cost of transition• Consider offsetting revenues

Consider effect of depreciation on comparisons between governments


City of Hillsborough, CA.


Pricing Internal Services (2013) Identify Goals

Govern Demand for a Service Develop Enterprise Rate Models Calculate Indirect Costs Provide Input for Full Costing Discuss Value of Service Promote Competition in Service Delivery Customize Service Levels for Different Customers

Decide Basis of Allocation Cause and Effect Relationship Benefit Received Fairness Legal Constraints


Internal Service Allocation Basis

Payroll processingNumber of employees, number of checks

Budgeting Labor hours, size of budget

Insurance Number of employees, experience

Legal services Direct labor hours

Office space / rent Square feet of space occupied

Procurement servicesNumber of P.O.s, dollar volumes, direct labor

Vehicle costs Miles driven, hours used

Information technology

Number of devices, server time, number of calls to help desk, direct labor hours

Examples of Internal Services Cost Allocation Bases


Incorporating a Capital Project Budget in the Budget Process (2007)

• The capital budget should be directly linked to, and flow from, the multi-year capital improvement plan.

• Organizations should establish specific criteria early in the process to help prioritize capital submittals.

• The capital budget should be adopted by formal action of the legislative body, either as a component of the operating budget or as a separate capital budget.

• Should comply with all state and local legal requirements. • Include a definition of capital expenditure for that entity.• Provide a summary information of capital projects by fund, category,

etc.• Show a schedule for completion of the project, including specific

phases of a project, estimated funding requirements for the upcoming year(s), and planned timing for acquisition, design, and construction activities.


• Descriptions of the general scope of the project, including expected service and financial benefits.

• A description and quantify any impact the project will have on the current or future

operating budget.

• Estimated costs of the project, based on recent and accurate sources of information.

• Identified funding sources for all aspects of the project.

• Any analytical information deemed helpful for setting capital priorities.

• Periodic reports should be issued routinely on all ongoing capital projects. comparing actual expenditures to the original budget, identify level of completion of the project, and enumerate any changes in the scope of the project, and alert management to any concerns with completion of the project on time or on schedule.

Incorporating a Capital Project Budget in the Budget Process (cont.) (2007)


City of Hanover Park, IL.


Elements of The Operating Budget Document

• Presenting Official Financial Documents on Your Government’s Website

• Making the Budget Document Easier to Understand• Departmental Presentation in the Operating Budget

Document• Presenting the Capital Budget in the Operating

Budget Document• The Statistical/Supplemental Section of the Budget

Document• Basis of Accounting versus the Budgetary Basis


Presenting Official Financial Documents on Your Government’s Website (2009)

Benefits Heightened awareness Universal accessibility (wide range of potential users) Potential for interaction with users Enhanced diversity (use of different languages) Facilitated analysis (can extract data) Increased efficiency (potential to reduce redundant reports) Lower costs (no handling and mailing, like with hardcopy) Contribution to sustainability (reduce paper consumption) Broadened potential scope (use of hyperlinks)


Presenting Official Financial Documents on Your Government’s Website (cont.) (2009)

Specific guidelines: Consistency with hardcopy version (if any) Legibility (font size and page layout/direction) should be consistent Pagination (numbers pages sequentially) File size

• Use single electronic file• Individual files for various components of reports may be used

as well• Don’t make files too large to download• Don’t burden the reader with too many files

Security (protect document from unauthorized changes) Placement (predominately on homepage) Software compatibility Features such as zooming, bookmark, facing pages and search

mechanism should be available


City of Corinth, TX.


Making the Budget Document Easier to Understand (2014)

Specific recommendations: Be Organized

• Consider sequence similar to Budget Awards criteria Avoid Excess Detail Attractive Design

• Simple and easy to use Consistency

• Like departmental presentations Highlights

• Consider a budget–in-brief• Effective tables, charts, etc.

Format• PDF numbering matches document page numbering• Link table of contents to specific pages by a click of the mouse• Have pages go in the same direction


City of Norfolk, VA.


Department Presentation in the Operating Budget Document (2012)

1. Design. The formatting can be enhanced as follows. 2. Brevity. Avoiding excessive detail is important, especially in financial schedules and

text. 3. Services. A description of services or functional responsibilities must be included. 4. Issues. Discuss challenges, issues, and opportunities. 5. Revenues. Revenues may include any fees or charges that the department

generates. 6. Expenditures. The analysis of expenditures should be done in a broad manner. 7. Staffing. Staffing information is usually presented in one of two manners. A

departmental organization chart may be provided to supplement the main organization chart of the government. A brief schedule may summarize the departmental headcount over a period of time (including the upcoming budget year), which would have the advantage of identifying trends.

8. Prioritization/Goals and Objectives. It has becoming increasingly common to explain how services are prioritized.

9. Measures. Performance measures typically are included in the respective departmental section of the budget document.


City of Bloomington, MN.


Presenting the Capital Budget in the Operating Document (2008)

• The capital budget should be in a distinct section of the budget document.

• A definition of capital expenditures should be included in the budget document. Governments frequently refer to asset life and dollar threshold in the definition. The capital budget should be adopted by formal action of the legislative body, either as a component of the operating budget or as a separate capital budget.

• The presentation should focus on both sources and uses. Indicate the total dollar amount of expenditures for the budget year and for the multi-year plan. The sources and uses summary should include all projects (regardless of fund) that fit within the government’s definition of capital expenditures. This can be presented by fund, category, priority, strategic goal, or geographic location.

• A calendar showing key dates in the capital process should be presented, along with text describing the process. The calendar could be next to the operating budget calendar.


• The criteria for evaluating capital projects could include such items as safety, location, return on investment, net payback, public need, connection to other plans, and available funding.

• Depending on the size and complexity of the capital plan, some projects within the capital plan may be contracted out versus managed in-house.

• Legible graphic illustrations (pictures or maps) can add value to a capital project presentation.

• Governments may consider indicating on individual capital project sheets what specific goals that the capital project is fulfilling.

• To avoid placing excessive detail in the capital section of the operating budget document, consideration may be given to placing the additional information on the web or in a separate capital document.

Presenting the Capital Budget in the Operating Budget Document (cont.) (2008)


City of Centralia, IL.


The Statistical/Supplemental Section of Budget Document (2005)

• Ensure relevance of data• Relate to rest of document• Fit to the specific type of government• Avoid excessive detail

• Organize information by major category• Form of government• Geography• Community profile• Demographics and economics

• Provide explanations


Illinois State Toll Highway Authority. IL.


Basis of Accounting versus the Budgetary Basis

(1999)

• Clearly define the basis of budgeting• State if the basis of budgeting and the

basis of accounting are the same• If not, note major differences and

similarities• Avoid technical terminology• If use of technical terminology unavoidable,

define and explain terms


Fairfax County, VA.

best practices in budgeting and fiscal policy november 17, 2015 john fishbein, senior program...

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